Insurance Contract Questions (Set Two)

Question 1

What is a contract? When is it not considered valid?

Answer 1

An agreement between two or more parties, where both are competent enough to represent themselves, to exchange things of value or refrain from doing a particular thing. It’s not considered valid if it requires one of the parties to do something illegal.

Question 2

What is mutual assent?

Answer 2

When all parties agree to all the terms of the contract.

Question 3

What three requirements must be met for a contract to be considered valid?

Answer 3

Serious intent, must be expressed clearly and in reasonable definite terms and must be communicated to the offeree.

Question 4

What is the mirror image rule?

Answer 4

The terms expressed in the acceptance must be an exact duplicate of the terms expressed in the offer.

Question 5

What is implied acceptance?

Answer 5

When the offerer is expecting an action rather than a promise, performance of the action is acceptance of the offer.

Question 6

When is a contract considered accepted when it is done in person?

Answer 6

When the offerer hears verbal acceptance.

Question 7

When is a contract considered accepted when it is done over the phone?

Answer 7

When the offerer hears verbal acceptance.

Question 8

When is a contract considered accepted when it is done through the mail?

Answer 8

When transit is initiated / when it’s placed in the mail.

Question 9

What happens when an acceptance is improperly dispatched through the mail?

Answer 9

It’s not considered valid until the offerer receives it.

Question 10

What is consideration?

Answer 10

The exchange of things of value.

Question 11

What is legal detriment?

Answer 11

The sacrifice made by each party.

Question 12

What does legal detriment mean?

Answer 12

The party is doing something they don’t have legal right to do, not doing something they have legal right to do, or giving up something they have legal right to keep.

Question 13

What is forbearance?

Answer 13

Refraining from doing something that you have right to do, like suing.

Question 14

What is the need for bargaining?

Answer 14

To ensure that each party has the potential to suffer a loss if the terms of the contract aren’t fulfilled.

Question 15

What are the three basic criteria for legal consideration in a contract?

Answer 15

Must be bargained for, adequate, and legal.

Question 16

What is capacity? When is a person considered to have it?

Answer 16

The legal ability to enter a contract. The person must be well-informed and possess free will.

Question 17

When are a person’s agreements voidable?

Answer 17

If they are severely mentally impaired or severely intoxicated.

Question 18

When are contracts invalid?

Answer 18

If it requires a party to do something illegal. Also, if it includes agreements to obstruct justice, interfere with public service or defraud creditors.

Question 19

What is an unilateral contract?

Answer 19

When one party promises to do something in return for the performance of a particular act. Considered accepted when the action is performed.

Question 20

What is a bilateral contract?

Answer 20

Both parties make promises and an explicit acceptance is required from the offeree.

Question 21

What is an aleatory contract?

Answer 21

Action being taken by one or both parties depends on whether or not a named event occurs. For example, insurance policies.

Question 22

What is the difference between an aleatory and conditional contract?

Answer 22

An action must be performed or a condition satisfied by one of the parties before the contractual obligations of the contract exist.

Question 23

What is an estoppel?

Answer 23

A restraint.

Question 24

When is an estoppel applied?

Answer 24

When preventing one party from denying the existence of an agreement. Usually applied to prevent unjust actions from taking place.